On Holding's Strong Brand Momentum Remains Unchanged, Analyst Says

Telsey Advisory Group analyst Cristina Fernández reiterated an Outperform rating on the shares of On Holding AG ONON with a price target of $30.00.
The analyst projects inline 4Q22 sales growth of 43% to CHF 273 million, reflecting demand for ONON products, good inventory availability and new product launches.
The analyst forecasts the gross margin to expand ~80 bps to 59.3% versus the FactSet (FS) consensus of 58.3%, reflecting pricing actions and lower freight costs, partially offset by negative FX and a lower share of DTC sales.
The analyst expects ONON to exceed its 2022 targets of CHF 1.125 billion in sales and CHF 148 million in EBITDA.
Despite a promotional holiday season, On's strong brand momentum remains unchanged, with higher brand awareness driven by new product introductions and an expanded presence at wholesale partners, added the analyst.
The more challenging part of the business is apparel, which is not performing as planned, and On is adjusting styles and the product presentation to improve performance, the analyst commented.
The analyst anticipates a lot of focus next week to be on the 2023 guidance and expects On to balance its positive outlook for the business with a bit of caution given an uncertain macro environment and FX volatility.
While the consumer environment is choppy, the analyst adds that On has a solid pipeline of product launches in 2023 to drive growth. The analyst also expects the gross and EBITDA margins to expand Y/Y.
Price Action: ONON shares are trading higher by 6.08% at $21.80 on the last check Thursday.

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